Harvey Hotels has provided a defined benefit pension plan for its employees for several years. At the end of the most recent year, the following information was available with regard to the plan: service cost: $7.3 million, expected return on plan assets: $2.3 million, actual return on plan assets: $2.1 million, interest cost: $2.5 million, payments to retired employees: $3.1 million, and amortization of prior service cost (created when the pension plan was amended causing a drop in the projected benefit obligation) : $2.2 million. What amount should Harvey Hotels report as pension expense in its income statement for the year

Question

Business

Shawn Pacheco

25 March, 01:39

Harvey Hotels has provided a defined benefit pension plan for its employees for several years. At the end of the most recent year, the following information was available with regard to the plan: service cost: $7.3 million, expected return on plan assets: $2.3 million, actual return on plan assets: $2.1 million, interest cost: $2.5 million, payments to retired employees: $3.1 million, and amortization of prior service cost (created when the pension plan was amended causing a drop in the projected benefit obligation) : $2.2 million. What amount should Harvey Hotels report as pension expense in its income statement for the year

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Landin Irwin · Answer 1

Pension expense of Harvey Hotels in its income statement for the year = $9.7 million.

Explanation:

Service cost = $7.3 million

Interest cost = $2.5 million

Amortization of prior service cost = $2.2 million

Expected return on plan assets = $2.3 million

Pension expense=?

Pension expense is decreased by amortization of net gain.

Pension expense = (Service cost + Interest cost - Expected return on plan assets + Amortization of prior service cost

= (7.3+2.5+2.2) - 2.3

= 9.7 million

Pension expense of Harvey Hotels in its income statement for the year = $9.7 million